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Thursday, 06 June 2013 13:00

Selective employers cite competition as driver for holding ground on wages

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The laws of supply and demand as they apply to the workforce are broken.

That’s according to George Erickcek, senior regional analyst with the W.E. Upjohn Institute for Employment Research in Kalamazoo.

Despite 15 quarters of positive growth nationwide, wages have stayed stagnant and in some cases even dropped a little. Just as the competition for talent is accelerating, companies are not willing to pay more for a what’s becoming a hot commodity: skilled workers.

This is particularly troubling to Erickcek. When there are shortages of food or gasoline, you’d expect prices to go up in much the same way you’d expect wages to start creeping up, he said.

“Employers have told me that because of competition, especially at the international level, they really can’t afford to increase wages,” Erickcek said. “So the question becomes: Is there a skill shortage or wage shortage? If you increased wages, could you find the workers you need?

“When I talk to employers, they are very, very honest. They can’t find individuals they really want to hire. They’re being very selective and rightly or wrongly not increasing wage rates.”

Michigan’s labor force dichotomy has been puzzling for many business owners, economists and economic developers. Employers with job openings struggle to find qualified people to fill them, but at the same time, the refrain from job-seekers is that they have the qualifications and yet have been unable to get hired.

To be sure, there is a growing disconnect between the jobs that are available and the individuals who are applying for these positions.

“When businesses say they can’t find the workers they’re looking for, they’re expressing true frustration with the quality of candidates they’re seeing when searching for new hires,” Erickcek said. “When you look at the data, you have to wonder because there are a lot of people looking for work. I think employers are trying to find that diamond in the rough who will need minimum training and be able to hit the ground running.”

Erickcek was the keynote speaker of the Summit to Discuss Michigan’s Talent Mismatch hosted by Michigan Works! and Kinexus, a nonprofit that pinpoints challenges and issues that keep the Southwest Michigan region from thriving and addresses gaps in workforce, community and business development.

The event, held in mid-May in Kalamazoo, was attended by representatives from the education and economic and workforce development sectors.

The Kalamazoo gathering followed the 18th annual Governor’s Education Summit held in April in East Lansing. During that gathering, Gov. Rick Snyder said convening experts from these different sectors will lead to more connectivity and alignment between the supply of skilled workers and the demands of employers.

“The goal of this is to take collaboration and creation and connect the two worlds of supply and demand,” Snyder said.

However, there are a number of major issues that need to be addressed in addition to making these connections, according to Erickcek.

Erickcek said he struggles when the available workforce data conflict with what the business community sees every day, namely their inability to find the workers they want. The reality is that there are 45,000 fewer individuals employed today than there were in 2008, and employers feel they are in a position to be very careful about who they select to hire, he said.

“They’re being very, very cautious and taking their time,” Erickcek said. “Because they can’t find that special person they’re looking for, they can say there seems to be a skills shortage.”

Manufacturing is one of the most vocal sectors voicing concerns about a labor shortage. A recent report by accounting firm BDO of the 100 largest publicly traded manufacturers nationwide showed 75 percent of the companies cited labor concerns as a risk.

“Despite the 7.5 percent unemployment rate, the manufacturing industry is still contending with a skilled labor shortage, particularly as many workers are reaching retirement age,” the report stated. In particular, manufacturers of transportation equipment reported labor concerns as a risk “significantly more than any other sector.”

While Erickcek said many people have been hired back into manufacturing careers — manufacturers added some 19,170 jobs in Michigan last year, he said — the question becomes what happened to the thousands of workers who have been unable to find work and what’s the impediment.

He thinks it’s because, on average, 38 percent of those individuals have been unemployed for longer than six months and long-term unemployment may be a stigma that leads employers to have doubts about those individuals.

“It’s easy to imagine that (there) may be something that is wrong with this person,” he said. “(If) he/she really was the right fit, they would have been picked up already.”

For people who were in their 50s when they lost their jobs during this most recent recession, the process of becoming reemployed is difficult. Erickcek said it’s possible that many of them have opted for a forced retirement out of frustration because employers don’t want to hire someone in that age range.

This appears to be the case in Kalamazoo County where about 1,700 people left the unemployment roles “all because they’re giving up,” Erickcek said.

The six metro areas in West Michigan (Battle Creek, Grand Rapids/Wyoming, Holland/Grand Haven, Kalamazoo/Portage, Muskegon/Norton Shores and Niles/Benton Harbor) last year added more than 8,000 net jobs, an increase of 1 percent, according to a March report from the Upjohn Institute. Total employment in West Michigan rose by 10,800 jobs for the year, an increase of 1.4 percent, the report stated.

In the quarterly update, Erickcek forecasted employment to increase 1.3 percent this year and rise 1.6 percent next year, driven by strong private sector growth and “partially offset” by a contraction of government jobs.

While acknowledging that it’s hard to paint a good picture of the current employment climates, Erickcek said there is reason for cautious optimism.

“The positive news is that when we did look at what happened over the past year, employment increased by about 2,500 jobs generated totally by growth in manufacturing,” he said, referring to an area covering Allegan, Barry, Berrien, Branch, Calhoun, Cass, Kalamazoo, St. Joseph and Van Buren counties. “However, the multiplier effect is really small. The multiplier is 1.1 jobs. For every 10 manufacturing jobs created in the area, one additional job was created. That’s really small. What’s shocking to me is even a decline in health care.

“Jobs are being created and there are job openings out there, and this is being powered by manufacturing. However, if you’ve been unemployed for longer than a year and you’re older and you don’t have the right set of tools or skills, you may face barriers for being reemployed.”

Read 3229 times Last modified on Friday, 19 July 2013 12:19

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